Correlation Between NTG Clarity and Edgewater Wireless

Can any of the company-specific risk be diversified away by investing in both NTG Clarity and Edgewater Wireless at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining NTG Clarity and Edgewater Wireless into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NTG Clarity Networks and Edgewater Wireless Systems, you can compare the effects of market volatilities on NTG Clarity and Edgewater Wireless and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in NTG Clarity with a short position of Edgewater Wireless. Check out your portfolio center. Please also check ongoing floating volatility patterns of NTG Clarity and Edgewater Wireless.

Diversification Opportunities for NTG Clarity and Edgewater Wireless

0.0

Correlation Coefficient

NTG Clarity  Edgewater Wireless

Pay attention - limited upside

The 3 months correlation between NTG and Edgewater is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding NTG Clarity Networks and Edgewater Wireless Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edgewater Wireless and NTG Clarity is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on NTG Clarity Networks are associated (or correlated) with Edgewater Wireless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edgewater Wireless has no effect on the direction of NTG Clarity i.e., NTG Clarity and Edgewater Wireless go up and down completely randomly.

Pair Corralation between NTG Clarity and Edgewater Wireless

Assuming the 90 days horizon NTG Clarity is expected to generate 12.07 times less return on investment than Edgewater Wireless. But when comparing it to its historical volatility, NTG Clarity Networks is 2.77 times less risky than Edgewater Wireless. It trades about 0.06 of its potential returns per unit of risk. Edgewater Wireless Systems is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  3.02  in Edgewater Wireless Systems on October 9, 2024 and sell it today you would earn a total of  2.48  from holding Edgewater Wireless Systems or generate 82.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

NTG Clarity Networks  vs.  Edgewater Wireless Systems

NTG Clarity Networks

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NTG Clarity Networks are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, NTG Clarity showed solid returns over the last few months and may actually be approaching a breakup point.

Edgewater Wireless

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Edgewater Wireless Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Edgewater Wireless is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NTG Clarity and Edgewater Wireless

The main advantage of trading using opposite NTG Clarity and Edgewater Wireless positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NTG Clarity position performs unexpectedly, Edgewater Wireless can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Edgewater Wireless will offset losses from the drop in Edgewater Wireless' long position.

The idea behind NTG Clarity Networks and Edgewater Wireless Systems pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Volatility Analysis module to get historical volatility and risk analysis based on latest market data.